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Unemployment Insurance Data Indicate Substantial Levels of Fraud during the Pandemic; DOL Should Implement an Antifraud Strategy
Unemployment Insurance Data Indicate Substantial Levels of Fraud during the Pandemic; DOL Should Implement an Antifraud Strategy
Report to Congressional Requesters
December 2022
UNEMPLOYMENT
INSURANCE
Data Indicate
Substantial Levels of
Fraud during the
Pandemic; DOL
Should Implement an
Antifraud Strategy
Accessible Version
GAO-23-105523
December 2022
UNEMPLOYMENT INSURANCE
Appendix II: State Reports on Unemployment Insurance (UI) Fraud and Potential Fraud 49
Tables
Table 1: Examples of Federal and State Entities’ Unemployment
Insurance (UI) Fraud Measures and Key Strengths and
Limitations 17
Table 2: Examples of Federal and State Entities’ Unemployment
Insurance (UI) Fraud-Related Measures and Key
Strengths and Limitations 21
Table 3: Examples of Methods Used to Estimate Extent of
Unemployment Insurance (UI) Fraud and Potential Fraud
at the Federal and State Levels and Key Strengths and
Limitations 25
Table 4: Summary of Approaches Used, Populations Assessed,
and Time Periods Covered by Three State-Level Reports 29
Figures
Figure 1: The Four Components of the Fraud Risk Framework and
Selected Leading Practices 14
Figure 2: Examples of Court-Adjudicated Unemployment
Insurance Cases during the Pandemic and Related Fraud
Risks, Charges, Sentences, and Restitution Amounts 19
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Letter
Congressional Requesters
1The UI system includes UI programs that were established prior to the COVID-19
pandemic (including the regular UI program and Extended Benefits), and programs
established in response to the COVID-19 pandemic (such as Pandemic Unemployment
Assistance and Federal Pandemic Unemployment Compensation, among others).
2Pub. L. No. 116-136, §§ 2102, 2104, 2107, 134 Stat. 281, 313-28. In addition, the
Consolidated Appropriations Act, 2021 created one additional temporary, supplemental UI
program. Pub. L. No. 117-2, § 9013(a), 135 Stat. 4, 119; Pub. L. No. 116-260, div. N, tit. II,
§ 261(a)(1), 134 Stat. 1182, 1961.
3In this report, we refer to the UI program—excluding the temporary UI programs created
by the CARES Act and other legislation—as the regular UI program and the benefits paid
under the program as regular UI benefits. We refer to the temporary UI programs created
by the CARES Act and the Consolidated Appropriations Act, 2021 as pandemic UI
programs.
4SWAs are responsible for administering unemployment insurance programs, among
other things.
5This amount includes about $209 billion in expenditures under the regular UI and
Extended Benefits programs, and about $669 billion in expenditures under pandemic UI
programs, which expired on September 6, 2021. The expenditure amounts for the
temporary programs include all compensation paid throughout the existence of the
programs. These programs were generally created at the end of March 2020 and expired
in September 2021, though some payments may have occurred after September 2021 for
weeks of unemployment prior to the programs’ expiration. We obtained April 2020 through
September 2022 expenditure amounts for the regular UI program, the Extended Benefits
program, and the pandemic UI programs on October 12, 2022 from DOL’s data
downloads website at https://oui.doleta.gov/unemploy/DataDownloads.asp.
6Fraud involves obtaining something of value through willful misrepresentation. The
Payment Integrity Information Act of 2019 defines an improper payment as any payment
that should not have been made or that was made in an incorrect amount (including
overpayments and underpayments) under statutory, contractual, administrative, or other
legally applicable requirements. 31 U.S.C. § 3351(4). As such, improper payments refer to
all kinds of erroneous payments, including but not limited to those resulting from fraud.
While all financial fraud contributes to improper payments, non-financial fraud, such as
fraudulently obtaining identification documents, may not result in an improper payment.
7Larry D. Turner, Inspector General, Department of Labor, Office of Inspector General,
testimony before the U.S. Senate Committee on Homeland Security and Governmental
Affairs, 19-22-003-315, March 17, 2022.
Background
Federally Funded UI Programs in Response to COVID19
The CARES Act created three new federally funded temporary UI
programs that expanded UI benefit eligibility and enhanced benefits.13
These programs were subsequently extended and amended by the
14Twenty-fourstates ended their participation in at least one of these programs before the
programs expired in September 2021.
15At the time of the program’s expiration in September 2021, PUA generally authorized up
to 79 weeks of benefits. Pub. L. No. 117-2, § 9011(a), (b), 135 Stat. 4, 118; Pub. L. No.
116-260, div. N, tit. II, § 201(a), (b), 134 Stat. 1182, 1950-1951 (2020); Pub. L. No. 116-
136, § 2102, 134 Stat. 281, 313 (2020).
16FPUC generally authorized an additional $600 benefit through July 2020 as well as an
additional $300 benefit for weeks beginning after December 26, 2020, through the end of
the program. Pub. L. No. 117-2, § 9013, 135 Stat. 4, 119; Pub. L. No. 116-260, div. N, tit.
II, § 203, 134 Stat. 1182, 1953; Pub. L. No. 116-136, § 2104 Stat. 281, 318.
17At the time of the program’s expiration, PEUC generally authorized an additional 53
weeks of benefits for claimants who were fully unemployed. Pub. L. No. 117-2, § 9016(a),
(b), 135 Stat. 4, 119-120; Pub. L. No. 116-260, div. N, tit. II, § 206(a), (b), 134 Stat. 1182,
1954; Pub. L. No. 116-136, § 2107, 134 Stat. 281, 323.
18The MEUC program, which was voluntary for states, authorized an additional $100
weekly benefit for certain UI claimants who received at least $5,000 of self-employment
income in the most recent tax year prior to their application for UI benefits between
December 27, 2020 and September 6, 2021. Pub. L. No. 117-2, § 9013(a), 135 Stat. 4,
119; Pub. L. No. 116-260, div. N, tit. II, § 261(a)(1), 134 Stat. 1182, 1961.
lower regular UI benefit than the benefit they would have received had
they been eligible for PUA.19
UI Program Administration and Funding
The federal government and states work together to administer UI
programs.20 States design and administer their own UI programs within
federal parameters. DOL oversees states’ compliance with federal
requirements, such as by reviewing state laws to confirm they are
designed to ensure payment of benefits when due. According to DOL,
state statutes establish specific benefit structures, eligibility provisions,
benefit amounts, and other aspects of the program. Regular UI benefits—
those provided by state UI programs before the CARES Act was
enacted—are funded primarily through state taxes levied on employers
and are intended to replace a portion of a claimant’s previous
employment earnings, according to DOL.21
19According to DOL, 51 states and territories elected to participate in the MEUC program,
with Idaho and South Dakota opting not to participate, but 23 states terminated their
participation in June or July 2021. The remaining 28 states and territories continued
participating in the MEUC program until it expired in September 2021, including Maryland,
which intended to terminate participation but did not because of litigation at the state level,
according to DOL.
20Fifty-threeSWAs administer UI programs across the 50 states, the District of Columbia,
Puerto Rico, and the U.S. Virgin Islands. For purposes of this report, when we refer to
states’ administration of the UI program, we include both states and territories.
21To be eligible for regular UI benefits, applicants must generally demonstrate workforce
attachment, be able and available to work, and be actively seeking work. 42 U.S.C. §
503(a)(12). Administration of the regular UI program is financed by a federal tax on
employers, according to DOL.
22Pub. L. No. 116-127, § 4102(b), 134 Stat. 178, 194 (2020).
The unprecedented demand for UI benefits and the urgency with which
states implemented the new programs during the pandemic increased the
risk of improper payments, including but not limited to those due to fraud.
DOL uses its Benefit Accuracy Measurement (BAM) program to estimate
the amount and rate of improper payments.24 Under the BAM program,
each state reviews a number of randomly selected cases on a weekly
basis and reconstructs the UI claims process to assess the accuracy of
the payments that were made.25 A BAM investigator reviews each
sampled claim and identifies errors and the causes of the error, including
23An improper payment is defined as any payment that should not have been made or
that was made in an incorrect amount (including overpayments and underpayments)
under statutory, contractual, administrative, or other legally applicable requirements. It
includes, but is not limited to, any payment to an ineligible recipient. See 31 U.S.C. §
3351(4). When an agency cannot determine, due to lacking or insufficient documentation,
whether a payment is proper, the payment shall be treated as an improper payment. See
31 U.S.C. § 3352(c)(2).
24According to DOL, although temporary UI programs, like the CARES Act UI programs,
have generally not been subject to the BAM program or improper payment estimation,
DOL has extrapolated and applied the improper payment rates generated by BAM to
PEUC and FPUC and included them in the UI improper payment estimate for fiscal year
2021 reporting. On July 14, 2022, DOL announced its plan to estimate the rate of
improper payments for PUA and to report a statistically valid national improper payment
rate by fall 2022. However, in its fiscal year 2022 reporting on paymentaccuracy.gov, DOL
stated that in October 2022, OMB requested that DOL conduct further analysis of the
outcomes recorded through the PUA case review process. Also, according to DOL, OMB
and DOL agreed to collaborate in conducting this additional analysis but DOL reported
that it cannot be completed in time to meet the fiscal year 2022 reporting deadline.
Therefore, according to DOL, OMB allowed additional time to conduct this analysis and
report on PUA outcomes in fiscal year 2023.
25BAM is a statistical survey used to identify and support resolutions of deficiencies in a
state’s UI system. BAM is also used to identify the root causes of improper payments and
supports other analyses conducted by DOL to identify improper payment prevention
strategies and measure progress in meeting improper payments reduction strategies.
Fraud and Fraud Risk Management
Fraud involves obtaining something of value through willful
misrepresentation, which is determined through the judicial or other
adjudicative systems.29 DOL’s OIG reported in November 2021 that
fraud—specifically claimants who received UI benefits through fraudulent
schemes such as those perpetrated during the COVID-19 pandemic—
was one of the leading causes of improper payments. However, it did not
report on a specific amount of fraud, as we discuss below.30
Our prior review of DOL OIG reports, state audits, and DOJ cases
identified several fraud risks in the UI programs and identified factors
30Department of Labor, Agency Financial Report, Fiscal Year 2021 (Washington, D.C.:
November 19, 2021). As reported in DOL’s Benefit Accuracy Measurement Data
Summary for performance year 2021, leading causes of improper payments included
unreported or misreported benefit year earnings, issues involving the claimant’s reasons
for separating from work, and other eligibility issues. These other eligibility issues include
refusal of suitable work, self-employment, a noncitizen not authorized to work, and when a
claimant filed a UI claim using the identity of another person. DOL also identified these
causes as contributing to the fraud rate.
31GAO-22-105051.
32Departmentof Labor, Agency Financial Report Fiscal Year 2020 (Washington, D.C.:
November 16, 2020).
33NASWA represents all 50 SWAs, the District of Columbia, and U.S. territories.
34GAO-22-105051.
35The fraud risks identified in this report do not constitute an exhaustive list of all fraud
risks affecting the UI programs.
36Department of Labor, Office of Inspector General, COVID-19: States Cite Vulnerabilities
in Detecting Fraud While Complying with the CARES Act UI Program Self-Certification
Requirement, Report No. 19-21-001-03-315 (Washington, DC: October 21, 2020).
37GAO-22-105051.
38GAO-15-593SP.
40Pub. L. No. 116-117, § 2(a), 134 Stat. 113, 131 - 132 (2020), codified at 31 U.S.C. §
3357. In October 2022, OMB issued a Controller Alert reminding agencies that consistent
with the guidelines contained in OMB Circular A-123, which are required by Section 3357
of the Payment Information Integrity Act of 2019, Pub. L. No. 116-117, they must establish
financial and administrative controls to identify and assess fraud risks. In addition, OMB
reminds agencies that they should adhere to the leading practices in GAO’s Fraud Risk
Management Framework as part of their efforts to effectively design, implement, and
operate an internal control system that addresses fraud risks. OMB, CA-23-03,
Establishing Financial and Administrative Controls to Identify and Assess Fraud Risk,
(October 17, 2022).
Figure 1: The Four Components of the Fraud Risk Framework and Selected Leading Practices
In October 2021, we found that DOL had taken steps to prevent and
detect fraud in UI programs and had ongoing program integrity activities
to identify risk.41 However, DOL had not comprehensively assessed fraud
risks in alignment with leading practices identified in the first and second
components of the Fraud Risk Framework. We made six
recommendations that DOL take actions to designate a dedicated
antifraud entity and comprehensively assess UI fraud risks in alignment
with leading practices. DOL neither agreed nor disagreed with these
recommendations. As of December 15, 2022, all six of these
41GAO-22-105051.
This report focuses on two leading practices within the third component of
the Fraud Risk Framework that are contingent upon creating a fraud risk
profile:
(1) using the fraud risk profile to help decide how to allocate resources
to respond to residual fraud risks and
(2) developing, documenting, and communicating an antifraud
strategy to employees and stakeholders that describes the program’s
activities for preventing, detecting, and responding to fraud.
Federal and State Measures and Estimates
Indicate Substantial Fraud and Potential Fraud
in UI Programs during the Pandemic but Do
Not Fully Reflect the Extent of Fraud
Considered together, measures—counts of detected activities—and
estimates—projections or inferences based on measures, assumptions,
or analytical techniques—indicate substantial levels of fraud and potential
fraud in UI programs during the pandemic. Federal and state entities have
produced several fraud and fraud-related measures and estimates of UI
fraud during the pandemic. These measures and estimates reflect a
variety of characteristics and potential indicators of fraud. While each type
of measure and estimate has strengths and limitations, as described
below, none completely and reliably indicates the extent of fraud in UI
programs during the pandemic.
programs during the wider pandemic period, it would suggest over $60
billion in fraudulent UI payments.44
Table 1: Examples of Federal and State Entities’ Unemployment Insurance (UI) Fraud Measures and Key Strengths and
Limitations
Description
Measure based on cases resolved via adjudicative process or other formal determination of fraud.
Key strengths Key limitations
Represents a legal or formal determination of Significantly understates fraudulent activity due to
Proven fraud fraud. limited resources to investigate, prosecute, and
Unlikely to count non-fraud. adjudicate cases and the difficulties inherent in
proving guilt.
44This approach relies on data from a manual file review of a statistical sample and falls
under the extrapolation from rates method described in table 3, and should be considered
in line with the limitations of both methods. To help account for these limitations and the
rough nature of our estimate, we rounded down to the nearest $10 billion. To specifically
address the uncertainty arising from the BAM program’s use of statistical sampling, we
used the lower limit of the BAM estimate. The available measures and estimates support
the use of the 2021 BAM fraud rate as an approximate lower, but not upper limit of the
fraud rate for all UI programs and the full period of pandemic spending. The actual amount
of fraud in UI programs during the pandemic may be substantially higher than the
estimated lower limit reported here. As noted in the next section, extrapolation is a
technique that can offer a rough or notional estimate of fraud or potential fraud even if
data on a specific measure or rate are unavailable, but may have limitations related to
validity, accuracy, and completeness.
45While restitution can be a fraud measure for the specific case being prosecuted, there
are limitations associated with a fraud measure based on combining restitution amounts
across cases. For example, multiple parties might share the responsibility of paying
restitution. Additionally, the amount of restitution ordered may not be the same as the
amount that was fraudulently obtained. Further, restitution is not always likely to be paid.
We previously reported that collecting federal criminal restitution is a long-standing
challenge. GAO, Federal Criminal Restitution: Department of Justice Has Ongoing Efforts
to Improve Its Oversight of the Collection of Restitution and Tracking the Use of Forfeited
Assets, GAO-20-676R (Washington, D.C.: September 30, 2020).
Figure 2: Examples of Court-Adjudicated Unemployment Insurance Cases during the Pandemic and Related Fraud Risks,
Charges, Sentences, and Restitution Amounts
Table 2: Examples of Federal and State Entities’ Unemployment Insurance (UI) Fraud-Related Measures and Key Strengths
and Limitations
Description
Measure based on counts of potential fraud cases brought by the Department of Justice (DOJ) or other
prosecutorial agencies.
Key strengths Key limitations
Cases accepted for Likely to capture fraudulent activity not yet included May also include cases that do not involve fraud.
prosecution in the proven fraud category, with relatively low Likely omits many cases that are fraudulent.
likelihood of counting non-fraud.
Examples of fraud-related measures
Count of cases with charges filed.
· Since March 2020, DOJ has publicly announced charges related to UI fraud. As of July 31, 2022, at
least 226 individuals are facing federal fraud-related charges related to UI.a
· As of September 2022, the Department of Labor (DOL) Office of Inspector General (OIG) reported that
its investigations have resulted in charging more than 1,000 individuals with crimes involving UI fraud
since March 2020.
· The Pennsylvania Attorney General’s office had brought charges against 56 individuals as of June
2022 for theft and related charges arising from fraudulent applications for PUA, according to an official
from this office.
· In Michigan, according to a press release from the state workforce agency (SWA), 54 individuals were
charged with UI fraud by either state or federal authorities as of December 2021.b
· According to an official with the Colorado Attorney General’s office, from June 2021 through June
2022, Colorado’s SWA referred 31 cases of potential UI fraud involving 77 claims to state prosecutors,
with the related restitution sought for these cases totaling over $800,000.
Description
Measure based on counts of investigative actions by law enforcement or other investigative agencies.
Key strengths Key limitations
Some indication that knowledgeable law Similar to proven fraud and cases accepted for
Cases accepted for enforcement experts find sufficient evidence of prosecution, with a greater risk of including cases that
investigation potential fraud to warrant an investigation. are not fraudulent.
This method may provide some sense of other Likely omits cases that are fraudulent.
cases yet to be adjudicated or charged.
47Data analytics can include predictive analytics, data mining, and data matching
techniques that enable programs to identify potential fraud or improper payments, either
prior to or after payments are made. See GAO, A Framework for Managing Fraud Risks in
Federal Programs, GAO-15-593SP (Washington, D.C.: July 2015).
have already pleaded guilty or been convicted at trial. The number of individuals facing UI fraud-
related charges has continued to grow in the past two years and will likely increase, as these cases
take time to develop. The statute of limitations for mail fraud and wire fraud prosecutions is 5 years
(18 U.S.C. § 3282), except for mail and wire fraud schemes that affect a financial institution, in which
case the statute is 10 years (18 U.S.C. § 3293). Also, based on our analysis, these cases can take
many years to resolve. In technical comments on a draft of this report, DOJ officials indicated that the
Executive Office for United States Attorneys’ (EOUSA) data show 574 individuals faced UI charges
as of July 31, 2022. This does not include data from other DOJ components.
b
In addition to these 54 individuals charged, as noted earlier, nine people have pleaded guilty or been
convicted of UI fraud, and three have been sentenced.
c
NUIFTF is a prosecutor-led, multi-agency task force with representation from federal and state
agencies that collaborate to investigate and prosecute UI fraud.
d
In September 2022, DOL OIG reported an updated amount of potentially fraudulent payments. In
analyses for earlier reporting, DOL OIG reviewed potentially fraudulent payments involving federal
prisoners. However, in its September 2022 reporting, DOL OIG noted that it did not have access to
DOJ’s Bureau of Prisons data to determine an increase in potential fraudulent payments related to
federal prisoners. Alert Memorandum: Potentially Fraudulent Unemployment Insurance Payments in
High-Risk Areas Increased to $45.6 Billion, Report No. 19-22-005-03-315 (September 21, 2022).
e
In technical comments on a draft of this report, officials from the Employment Security Department of
the State of Washington noted that March 2020 yielded a large number of fraudulent claims.
However, the state has since implemented additional controls to reduce fraud.
f
In technical comments on a draft of this report, Colorado Department of Labor and Employment
officials noted that the potential fraud identified by the state auditor was based on fraud indicators
developed by the state auditor. According to officials, the department cross-referenced the potential
fraud found by the auditors with its indicators and found that many instances of fraud had already
been identified and others had been determined not to be fraudulent after investigation. The
department continues to actively investigate reports of fraud.
Taken together, the fraud and fraud-related measures described above
indicate substantial fraud and potential fraud in UI programs during the
pandemic. As described above, fraud measures reported by states
indicate that UI fraud during the pandemic exceeds $4 billion and fraud-
related measures suggest that at least $45 billion in payments have some
indication of potential fraud. However, existing fraud and fraud-related
measures do not reliably indicate the extent of fraud, due to the various
concerns regarding false positives and false negatives described above.
fraud measures and the uncertainty about the extent of fraud indicated by
fraud-related measures.
Fraud and fraud-related estimates vary in the method used, scope, and
purpose. Further, each estimate faces challenges related to validity,
accuracy, and completeness, which often limits the ability to meaningfully
combine them. Available estimates provide additional evidence of
substantial levels of UI fraud and potential fraud during the pandemic, but
none completely or reliably indicates the extent of fraud in UI programs.
Table 3 describes examples of methods used by federal and state entities
to estimate the extent of UI fraud and potential fraud, and the related key
strengths and limitations.
48DOL’s fiscal year reporting is based on information gathered for this performance year.
Table 3: Examples of Methods Used to Estimate Extent of Unemployment Insurance (UI) Fraud and Potential Fraud at the
Federal and State Levels and Key Strengths and Limitations
Description
Estimation based on either calculating or using an existing rate of fraud or potential fraud for one population (i.e.,
selected programs or time periods), and applying it to a new population.a
Key strength
Extrapolation Potential for a rough or notional estimate of fraud or potential fraud even if data on a specific measure or rate are
from rates unavailable.
Key limitations regarding validity, accuracy, and completeness
Limitations regarding validity Limitations regarding accuracy Limitations regarding completeness
There are a wide variety of rates that The limitations associated with Because rates based on fraud and
represent different things (for each type of measure and estimate fraud-related measures and estimates
example, the proportion of flagged still exist (i.e., extrapolation from do not account for all fraud,
applications to the total population, or rates based on measures that extrapolations of these rates similarly
overpayments related to adjudicated undercount fraud will also do not provide a complete picture.
fraud as a proportion of all undercount fraud). Moreover,
payments). Sometimes reports are changes in the nature of programs
not clear about the rate used, so a and fraud may limit the ability of
reader will have to determine if the prior rates to accurately reflect
rate refers to an aspect of current rates.
adjudicated fraud or potential fraud,
and whether the rate represents a
direct measure or estimate.b
Examples
· New Mexico’s state auditor estimated that New Mexico’s state workforce agency (SWA) made $250 million in
overpayments—of which $133 million were the result of fraud—from the week ending on April 18, 2020 through
the week ending on April 17, 2021. To develop this estimate, the state auditor multiplied the 2020 overpayment
rate by the total benefit amounts for regular UI, Federal Pandemic Unemployment Compensation (FPUC),
Pandemic Unemployment Assistance (PUA), and temporary compensation paid.c The state auditor then
multiplied the 2020 fraud rate by the estimated total benefits amount.
· The Department of Labor (DOL) Office of Inspector General (OIG) applied the fiscal year 2021 DOL-reported
improper payment rate of 18.71 percent to its estimate of $872.5 billion in pandemic UI payments. It assumed
that the pandemic rate of improper payments would be this high, in order to conclude that at least $163 billion
in pandemic UI benefits could have been paid improperly.d The OIG further speculated that a significant portion
of these estimated improper payment amounts could be attributable to fraud. However, there is no evidence or
data to quantify the portion attributable to fraud.
The DOL OIG’s improper payment estimate of $163 billion was based on the regular UI program and has
limitations regarding validity, accuracy, and completeness described above. For example, the information
required to claim UI benefits under the PUA program differed greatly from regular UI. One difference was that
claiming UI benefits under the PUA program did not require employer certification for self-employed individuals.
This could have impacted the total number of people who would apply for benefits and the proportion that might
attempt to do so fraudulently, both of which would result in a different rate of fraudulent applications. The lack
of certification required may make it more difficult to validly determine whether a claim was fraudulent, and may
make it hard to determine how different these rates may be. Moreover, the CARES Act allowed PUA applicants
to self-certify their eligibility and did not require them to provide any documentation of self-employment or prior
income.
Description
Estimation based on a trained reviewer analyzing a statistically-generated sample of claims with results generalized
to the full population.
Key strength
Manual file A statistical sample can serve as a valid representation of the entire population. Sampling allows reviewers to invest
review of a more resources in researching sampled cases than would be possible if every item had to be reviewed.
statistical Key limitations regarding validity, accuracy, and completeness
sample
Limitations regarding validity Limitations regarding accuracy Limitations regarding completeness
The definitions and judgments of Because reviews are highly To be complete, a sampling strategy
fraud may vary due to state dependent on the training and skill must be validly generalizable to the
differences, reviewer differences, and of the reviewer (i.e., they are intended population.
other factors. resource intensive), it can be
difficult to complete the required
number of reviews needed for
generalizability, or to thoroughly
and accurately complete each
review.
Reviewers typically have less
information than what would be
gathered during investigative and
adjudicative processes, which may
limit their ability to accurately
determine which cases are
fraudulent.
Examples
· Under DOL’s Benefit Accuracy Measurement (BAM) program, each SWA reviews a number of randomly
selected cases on a weekly basis and reconstructs the UI claims process to assess the accuracy of the
payments that were made.e As part of these assessments, investigators survey or interview the claimant and all
prior or current employers relevant to the claim. Once the investigation is complete, the BAM investigators
categorize overpayments by cause, including fraud.
In its BAM Data Summary for performance year 2021, DOL reported a total estimate of fraud in the regular UI
program of about $8.5 billion with a fraud rate of almost 8.6 percent. The performance year covered July 1,
2020 through June 30, 2021 and the estimate was based on overpayments determined by investigators as
caused by fraud.f
An important limitation is that states may vary in how they define standards for fraud, train investigators, and
validate judgments. As a result, some investigator determinations may be inaccurate, comparisons of rates
across states may be misleading, and aggregation of state estimates into a total should be interpreted with
these considerations in mind.
It is also important to note other limitations to BAM fraud rate estimates during the pandemic. While these are
limitations related to overall improper payment estimates, they also apply to the subset of estimated
overpayments determined by investigators as caused by fraud.
· BAM program did not cover the start of the pandemic due to a 3-month suspension of testing. For
performance year 2020, DOL allowed states to suspend BAM assessments from April through June 2020
to enable the states to reassign staff to address increased claims volume.g As a result of suspending BAM,
the DOL OIG reported that $64.3 billion (74 percent) of the total $86.9 billion of regular UI benefit
payments went untested for that performance year. The DOL OIG report stated that DOL had met all the
statutory criteria for compliance with the Payment Integrity Information Act of 2019 for fiscal year 2020.h
For performance year 2021, DOL fully resumed BAM testing for improper payments.
· BAM program does not include payments for the pandemic UI programs. For performance years 2020 and
2021, the BAM program only included regular UI claims and did not include payments associated with
pandemic UI programs. For fiscal year 2021 improper payment reporting, DOL applied the estimated
improper payment rate from BAM to calculate the estimated improper payment amounts for FPUC and
PEUC. The estimated improper payment amounts for these two programs were incorporated into the
overall estimated improper payment amount for the UI program. However, this overall estimated improper
payment amount for the UI program did not include an estimate for PUA. The CARES Act allowed PUA
applicants to self-certify their eligibility and did not require them to provide any documentation of self-
employment or prior income. In October 2021 we found that this was a factor that increased the possibility
of fraud.i
On July 14, 2022, DOL announced its plan to estimate the rate of improper payments for PUA and to report a
statistically valid national improper payment rate by fall 2022.j However, in its fiscal year 2022 reporting on
paymentaccuracy.gov, DOL stated that in October 2022, the Office of Management and Budget (OMB)
requested that DOL conduct further analysis of the outcomes recorded through the PUA case review process.
In addition, according to DOL, OMB and DOL agreed to collaborate in conducting this additional analysis but
DOL reported that it could not complete this analysis in time to meet the fiscal year 2022 reporting deadline.
Therefore, according to DOL, OMB allowed additional time to conduct this analysis and report on PUA
outcomes in fiscal year 2023.
· DOL OIG statistically sampled and reviewed claims from four selected states to identify pandemic-related UI
funds paid improperly. Of the four states tested, from March 28, 2020, through September 30, 2020, DOL OIG
estimated $9.9 billion of the $71.7 billion (almost 14 percent) in PUA and FPUC benefits were likely paid to
fraudsters.k
· At the state level, an independent accounting firm engaged by the Michigan SWA used a sampling technique to
identify potential UI fraud during the pandemic. Specifically, it drew a sample of 7,741 claims from March 1,
2020 to October 2, 2020 and 7,096 claims from October 3, 2020 to September 30, 2021 using 38 fraud risk
indicators. The firm concluded that the SWA paid out an estimated $8.36 billion to $8.51 billion on potentially
fraudulent claims but avoided paying out $28.7 billion on other potentially fraudulent claims. This estimate did
not attempt to determine what proportion of potentially fraudulent payments were likely to be fraud.
Description
Estimate based on economic, statistical, and simulation models that rely on variables and data from data analytics,
manual file reviews, or other statistical and administrative data.
Key strengths
Modeling or A wide range of techniques can be used to correct for common technical issues (e.g. impute data, control for
forecasting confounding variables, and account for probabilistic uncertainty).
Key limitations regarding validity, accuracy, and completeness
Limitations regarding validity Limitations regarding accuracy Limitations regarding completeness
There are a wide variety of ways to Lack of consistent or complete data Extremely resource intensive to gather
design and implement models and requires assumptions and data from disparate sources and
forecasts, and various design choices imputations that may limit power modify these sources so they can be
have impacts on the ability to validly and accuracy of models. used together.
estimate fraud. Resulting data may retain many of the
limitations associated with each type of
measure, as described above.
Example
· In Kansas, the state auditor’s office used a machine learning technique to estimate UI fraud during the
pandemic. Specifically, it used a neural network—a form of machine learning used to replicate human decision-
making. To train and validate the neural network, state auditor staff manually reviewed a random sample of
1,000 unique claims to identify 26 potential indicators of fraud. Then, the state auditor ran the approximately
1.08 million unique claims received from January 2020 to February 2021 through the neural network. The
neural network classified $380 million as potentially fraudulent, including $309 million that had been flagged by
the state and $71 million not previously flagged.l
Source: GAO analysis of methods used to estimate the extent of UI fraud at the federal and state levels and rawku5/stock.adobe.com (icons). | GAO-23-105523
a
A rate is generally expressed as the proportion of a measured or estimated value relative to an
overall total.
b
Some reports also use improper payment rates, which do not, and are not intended to, reflect fraud
rates.
c
This work was conducted by New Mexico’s Legislative Finance Committee. The committee’s role
includes an audit function. While New Mexico has an Office of the State Auditor, for the purposes of
this report, we refer to the Legislative Finance Committee as a state auditor.
d
The DOL OIG’s 18.71 percent improper payment rate does not include unknown payments. When
unknown improper payments are included, the total improper payment rate is 18.92 percent. Larry D.
Turner, Inspector General, DOL, Office of Inspector General, testimony before the U.S. Senate
Committee on Homeland Security and Governmental Affairs, Number 19-22-003-03-315, March 17,
2022.
e
DOL uses its BAM program to determine the accuracy of UI benefit payments and to estimate the
amount and rate of improper payments, including the amount and rate of overpayments determined
by investigators as due to fraud. The results of the BAM statistical samples are used to estimate
accuracy rates for the populations of paid and denied claims.
f
The BAM Data Summary for performance year 2022 was not available at the time of GAO’s review.
g
DOL’s performance year for reporting improper payment estimates covers July 1 of the previous year
through June 30 of the current year. For example, DOL’s fiscal year 2020 improper payment estimate
generally covers the performance year from July 1, 2019, through June 30, 2020. However, the
sampling and investigation program was suspended for the quarter April 1, 2020, through June 30,
2020, because of operational flexibilities provided to states in response to the pandemic, according to
DOL.
h
In addition, DOL’s OIG reported that DOL received direction from OMB to use the results from the
first three quarters of the program year for its improper payment reporting in fiscal year 2020 and that
DOL’s decision to suspend fourth quarter program year testing was approved by OMB. DOL, OIG,
The U.S. Department of Labor Complied with the Payment Integrity Information Act for FY 2020, but
Reported Unemployment Insurance Information Did Not Represent Total Program Year Expenses,
Report No. 22-21-007-13-001 (Washington, D.C.: August 6, 2021).
i
To help address this risk, the Consolidated Appropriations Act, 2021, enacted in December 2020,
included a requirement for individuals to submit documentation of employment or self-employment
when applying for PUA. Pub. L. No. 116-260, div. N, tit. II, § 241(a), 134 Stat. 1182, 1959-60.
j
Specifically, to calculate the PUA improper payment rate, DOL and state staff stated they would
review a sample of PUA cases from 26 states, including the 10 states with the highest PUA outlays—
representing 74 percent of all PUA outlays—and 16 randomly-selected states. DOL does not have
plans to estimate improper payments for the MEUC program, according to officials, because the
program only operated between January and September of 2021. Officials explained that in
accordance with OMB guidance, DOL is not required to estimate or report improper payments for this
program because it existed for less than one year.
k
DOL OIG, COVID-19: ETA and States Did Not Protect Pandemic-Related UI Funds from Improper
Payments Including Fraud or From Payment Delays, Report No. 19-22-006-03-315 (Washington,
D.C.: September 30, 2022).
l
As of September 2022, the Kansas SWA continues to review issues related to UI fraud.
Table 4: Summary of Approaches Used, Populations Assessed, and Time Periods Covered by Three State-Level Reports
Source of report Approach used Population assessed Time period covered by reporting
Colorado state auditor Measure of flagged cases Potential Fraud March 2020 to April 20, 2021
using data analytics
Michigan state workforce Estimate based on manual Potential Fraud March 1, 2020 to September 30, 2021
agency file review
New Mexico state auditor Estimate based on Fraud April 18, 2020 to April 17, 2021
extrapolation from rates
Source: GAO summary of elements of three state-level reports on fraud and potential fraud. | GAO-23-105523
The Michigan SWA and the New Mexico state auditor reports used
different approaches and are estimating two different populations.
Specifically, the Michigan SWA’s report estimates potential fraud (the
number of transactions that would have any indicator of fraud if all were
reviewed) and the New Mexico SWA estimates fraud (cases that, if
adjudicated, would likely be fraudulent). Their estimates also have two
different levels of reliability since the Michigan SWA’s report estimate is
based on a review of a statistical sample of pandemic claims, while the
New Mexico state auditor’s estimate is extrapolated from a fraud rate for
primarily pre-pandemic claims. Therefore, attempting to combine these
estimates into a broader total could be misleading due to differences in
both the population estimated and the reliability of the estimate.
between March 2020 and April 20, 2021. Similar to the example above,
the Colorado state auditor assessed potential fraud, which is not
comparable to the New Mexico state auditor’s estimate of fraud, and
would likely make combining these two misleading. Moreover, because
the Colorado state auditor reports a measure of potential fraud, while the
Michigan SWA reports an estimate of fraud, any attempt to combine
these two figures would require careful consideration of differences in
reliability in order to ensure that the result is not misleading.
Due to the lack of consistent and reliable estimates that cover all UI
payments during the pandemic, it is not currently possible to combine
existing estimates and measures to make meaningful statements about
the extent of fraud in UI programs during the pandemic.
49Department of Labor, Office of Inspector General, COVID-19: ETA and States Did Not
Protect Pandemic-Related UI Funds from Improper Payments Including Fraud or From
Payment Delays, Report No. 19-22-006-03-315 (Washington, D.C.: September 30, 2022).
50Department of Labor, Office of Inspector General, Report No. 19-21-001-03-315.
also did not cover the first three months of the pandemic, and some
states reported the early pandemic period was associated with a higher
risk for fraud.51
The above evidence supports the use of the BAM 2021 fraud rate to
roughly extrapolate a lower-bound for the extent of fraud in all UI
programs during the wider pandemic period. Specifically, if the lower
bound of DOL’s estimated national fraud rate (7.6 percent) in the regular
UI program for July 1, 2020, to June 30, 2021, was applied more broadly
to all pandemic payments from roughly April 2020 through December
2021 (about $849 billion), then the estimated total fraud in UI programs
during the pandemic would be greater than $60 billion.52
51For example, the California State Auditor reported on the lack of controls in place at the
start of the pandemic. Auditor of the State of California, Employment Development
Department: Significant Weaknesses in EDD’s Approach to Fraud Prevention Have Led to
Billions of Dollars in Improper Benefit Payments, Report 2020-628.2. (Sacramento, CA:
2021).
52This approach relies on data from a manual file review of a statistical sample and falls
under the extrapolation from rates method described in table 3, and should be considered
in line with the limitations of both methods. To help account for these limitations and the
rough nature of our estimate, we rounded down to the nearest $10 billion. To specifically
address the uncertainty arising from the use of statistical sampling, we used the lower limit
of the performance year 2021 BAM fraud rate estimate. The available measures and
estimates support the use of the 2021 BAM fraud rate as an approximate lower, but not
upper limit of the fraud rate for all UI programs and the wider period of pandemic
spending. The actual amount of fraud in UI programs during the pandemic may be
substantially higher than the estimated lower limit reported here. Extrapolation is a
technique that can offer a rough or notional estimate of fraud or potential fraud even if
data on a specific measure or rate are unavailable, but may have limitations related to
validity, accuracy, and completeness.
DOL Has Taken Steps to Address UI Fraud
Risks but Has Not Designed and Implemented
a Strategy to Manage These Risks
DOL Has Taken Steps to Address UI Fraud Risks
DOL has taken various steps to address fraud risks in the UI system.
Specifically, DOL has provided SWAs with fraud-related guidance, tools
and resources, and funding. In addition, DOL collaborated with the DOL
OIG to share information on emerging UI fraud issues and coordinate
fraud prevention and recovery efforts.
55Pub. L. No. 116-260, div. N, tit. II §§ 241(a), 134 Stat. 1182, 1959-1960, 1963.
56In addition, it required states to have procedures for identity verification and for timely
payment of PUA benefits, to the extent reasonable and practicable. Pub. L. No. 116-260,
div. N, tit. II, § 242(a), 134 Stat. 1182, 1960.
57UIPL No. 09-21.
58To be eligible for UI benefits, an individual must be able, available, and actively seeking
work. Incarcerated individuals do not typically meet the eligibility requirements to receive
UI benefit payments as they would not be able or available for work while incarcerated.
UIPL No. 01-22.
59According to DOL officials, as of August 2022, twelve states receive incarceration data
through direct agreements with SSA and are not expected to request these data through
the secure data exchange facilitated by DOL.
60As of July 22, 2022, DOL announced five grants totaling $665,000,000 for fraud
prevention, detection, investigation, and recovery activities in pandemic UI programs and
the regular UI program. UIPL No. 28-20; UIPL No. 28-20, change 1; UIPL No. 28-20,
change 2; UIPL 28-20, change 4; and UIPL No. 22-21.
Michigan used grant funding to hire program integrity staff. Some of these
staff have focused on identity theft cases or detecting and recovering
overpayments, according to DOL officials.61 States have also used this
funding to engage third-party vendors to conduct fraud risk and
cybersecurity assessments of states’ UI systems and subscribe to identity
verification and fraud risk scoring services, according to DOL officials.
65In UIPL No. 22-21, DOL encouraged states to implement National Institute of Standards
and Technology-compliant identity proofing requirements before claimants start filling out
UI claims applications and for re-accessing their accounts.
66Currently, this SWA conducts identity verification of claims manually.
67UIPL Nos. 23-20; 28-20; 28-20, change 1; 28-20, change 2; and 22-21.
DOL Has Not Designed and Implemented an Antifraud
Strategy Based on a Fraud Risk Profile
While DOL has taken steps to address UI fraud risks, as described
above, its approach has been ad hoc. Specifically, it has not designed
68https://oui.doleta.gov/unemploy/pdf/TigerTeamCohortTrendsJune_2022.pdf. Accessed
August 24, 2022.
The Fraud Risk Framework calls for a strategic approach for assessing
and managing fraud risks. Specifically, the third component of the Fraud
Risk Framework—design and implement—calls for federal managers to
design and implement a strategy with specific control activities to mitigate
assessed fraud risks and collaborate to help ensure effective
implementation. Managers who effectively manage fraud risks develop
and document an antifraud strategy that describes the program’s
approach for addressing the prioritized fraud risks identified during the
fraud risk assessment.
69Although the UI program is a federal-state partnership, the Fraud Risk Framework states
that managers of federal programs maintain primary responsibility for enhancing program
integrity. However, the Fraud Risk Framework also notes the importance of working with
stakeholders on fraud risk management, which, for the UI program, includes states.
70We also recommended that DOL designate a dedicated entity and document its
responsibilities for managing the process of assessing fraud risks to the UI program. This
entity should have, among other things, clearly defined and documented responsibilities
and authority for managing fraud risk assessment and facilitating communication among
stakeholders regarding fraud-related issues. In August 2022, DOL officials told us that
they are documenting a dedicated entity’s responsibilities for managing fraud risks.
71According to Federal Internal Control Standards, inherent risk is the risk to an entity prior
to considering management’s response to the risk (see GAO-14-704G, 7.03).
72According to Federal Internal Control Standards, risk tolerance is the acceptable level of
variation in performance relative to the achievement of objectives (see GAO-14-704G,
6.08).
73In general, managers accept certain risks that are within their defined risk tolerance and
take one of the other three actions in response to prioritized residual fraud risks that
exceed their defined risk tolerance. Specifically, managers may allocate resources to
prevent or detect fraud risks that exceed their risk tolerance but they may decide not to
allocate resources to further reduce unlikely, low-impact risks that fall within their risk
tolerance. Moreover, while managers may accept certain fraud risks, responding
appropriately to instances of actual fraud is essential for ensuring the continued
effectiveness of fraud risk management activities.
Who is responsible for fraud Establish roles and responsibilities of those involved in
risk management activities? fraud risk management activities, such as the antifraud
entity and external parties responsible for fraud
controls, and communicate the role of the Office of
Inspector General to investigate potential fraud.
What is the program doing to Describe the program’s activities for preventing,
manage fraud risks? detecting, and responding to fraud, as well as
monitoring and evaluation.a
When is the program Create timelines for implementing fraud risk
implementing fraud risk management activities, as appropriate, including
management activities? monitoring and evaluations.
Where is the program focusing Demonstrate links to the highest internal and external
its fraud risk management residual fraud risks outlined in the fraud risk profile.
activities?
Why is fraud risk management Communicate the antifraud strategy to employees and
important? other stakeholders, and link antifraud efforts to other
risk management activities, if any.
Source: GAO-15-593SP. | GAO-23-105523
a
According to Federal Internal Control Standards, control activities are the policies, procedures,
techniques, and mechanisms that enforce managers’ directives to achieve the program’s objectives
and address related risks. Broadly speaking, the antifraud strategy itself can be viewed as a
preventive control activity, although it can inform other control activities, such as the content of fraud-
awareness training or the design of system edit checks. The antifraud strategy describes existing
fraud control activities, as well as any new control activities a program may have planned or adopted
to address any residual fraud risks. GAO, Standards of Internal Control in the Federal Government,
GAO-14-704G (Washington, D.C.: September 10, 2014).
DOL’s actions described above are steps to prevent, detect, and respond
to fraud, but DOL lacks a fraud risk profile to better inform an antifraud
strategy that targets fraud risks in a prioritized manner. In August 2022,
DOL officials told us they are in the process of developing a fraud risk
profile but they have not yet finalized the profile. Until DOL completes
these efforts and uses them to inform its antifraud strategy, consistent
with our prior recommendations, it cannot be sure it is identifying,
assessing, and prioritizing risks effectively. For example, this could
include fraud risks identified during the pandemic that may continue to
exist in the regular UI program after the expiration of the temporary UI
programs.
Conclusions
The unprecedented demand for UI benefits and the urgency with which
states implemented the new pandemic programs increased UI fraud and
fraud risks.
While currently available measures and estimates do not reflect the full
extent of fraud, they provide important information on fraud risks facing
the UI program. Some fraud risks identified in the pandemic UI programs
may continue to exist in the regular UI program after the expiration of the
temporary UI programs. DOL has taken steps to address UI fraud and
fraud risks, including issuing guidance and distributing funding. However,
DOL has not developed and documented an antifraud strategy to guide
these actions in a prioritized manner.
Recommendation for Executive Action
The Secretary of Labor should design and implement an antifraud
strategy for UI based on a fraud risk profile consistent with leading
practices as provided in the Fraud Risk Framework. (Recommendation 1)
Agency Comments and Our Evaluation
We provided a draft of this report to DOL, DOJ, and DHS for review and
comment. DOL provided written comments, which are reproduced in
appendix IV. DOL also provided technical comments, which we
incorporated as appropriate.
As agreed with your offices, unless you publicly announce the contents of
this report earlier, we plan no further distribution until 30 days from the
report date. At that time, the report will be available at no charge on the
GAO website at https://www.gao.gov.
If you or your staff have any questions about this report, please contact
Seto Bagdoyan, (202) 512-6722, BagdoyanS@gao.gov or Jared Smith,
(202) 512-2700, SmithJB@gao.gov. Contact points for our Offices of
Congressional Relations and Public Affairs may be found on the last page
of this report. GAO staff who made key contributions to this report are
listed in appendix V.
Seto J. Bagdoyan
Director, Forensic Audits and Investigative Service
Jared B. Smith
Director, Applied Research and Methods
List of Requesters
Appendix I: Open
Unemployment Insurance–
Related Recommendations to
the Department of Labor
Table 6 below lists GAO’s 19 open recommendations to the Department
of Labor to improve the Unemployment Insurance system. The first five
recommendations listed warrant priority attention from heads of key
departments or agencies because implementation could:
Table 6: GAO’s 19 Recommendations to the Department of Labor (DOL) to Improve the Unemployment Insurance (UI) System,
Open as of December 15, 2022
Report No.,
No. Date Recommendation to DOL
1 GAO-22-104438, (priority) The Secretary of Labor should ensure the Office of Unemployment Insurance examines
June 7, 2022 and publicly reports on the extent and potential causes of racial and ethnic inequities in the
receipt of Pandemic Unemployment Assistance (PUA) benefits, as part of the agency’s efforts to
modernize UI and improve equity in the system. The report should also address whether there is
a need to examine racial, ethnic, or other inequities in regular UI benefit receipt, based on the
PUA findings.
2 GAO-22-105051, (priority) The Secretary of Labor should examine the suitability of existing fraud controls in the UI
October 27, 2021 program and prioritize residual fraud risks.
3 GAO-21-191, (priority) The Secretary of Labor should ensure the Office of Unemployment Insurance pursues
November 30, 2020 options to report the actual number of distinct individuals claiming benefits, such as by collecting
these already available data from states, starting from January 2020 onward.*
4 GAO-18-486, (priority) The Assistant Secretary of DOL’s Employment and Training Administration should
August 22, 2018 provide states with information about its determination that the use of state formal warning
policies is no longer permissible under federal law.
Report No.,
No. Date Recommendation to DOL
5 GAO-18-486, (priority) The Assistant Secretary of DOL’s Employment and Training Administration should
August 22, 2018 clarify information on work search verification requirements in its revised Benefit Accuracy
Measurement procedures. The revised procedures should include an explanation of what DOL
considers to be sufficient verification of claimants’ work search activities.
6 GAO-22-105162, The Secretary of Labor should develop and execute a transformation plan that meets GAO’s
June 7, 2022 high risk criteria for transformation; the plan should outline coordinated and sustained actions to
address known issues related to providing effective service and mitigating financial risk,
including ways to demonstrate improvements. Planned actions may include addressing audit
recommendations, and determining whether legislative changes are needed, as appropriate.
Planned actions may also include achieving quantifiable results in reducing improper payment
rates, including those related to fraud; improving efficiency in claims processing and restoring
pre-pandemic payment timeliness levels; better reaching current worker populations; and
enhancing equity in benefit distribution.
7 GAO-22-104438, The Secretary of Labor should study and advise the Congress and other policymakers on the
June 7, 2022 costs, benefits, and risks of various options to systematically support self-employed and
contingent workers during periods of involuntary unemployment outside of declared disasters,
including considering options’ feasibility and approach to fraud prevention.
8 GAO-22-104251, The Secretary of Labor should ensure the Office of Unemployment Insurance review the
June 7, 2022 customer service challenges that states faced during the pandemic, identify comprehensive
information on customer service best practices, and provide states with this information to
assist them in improving service delivery.
9 GAO-22-104251, The Secretary of Labor should ensure the Office of Unemployment Insurance assesses lessons
June 7, 2022 learned from the pandemic to inform its future disaster responses efforts and support the
Congress on ways to address future emergencies.
10 GAO-22-105051, The Secretary of Labor should designate a dedicated entity and document its responsibilities
October 27, 2021 for managing the process of assessing fraud risks to the UI program, consistent with leading
practices as provided in our Fraud Risk Framework. This entity should have, among other
things, clearly defined and documented responsibilities and authority for managing fraud risk
assessments and for facilitating communication among stakeholders regarding fraud-related
issues.
11 GAO-22-105051, The Secretary of Labor should identify inherent fraud risks facing the UI program.
October 27, 2021
12 GAO-22-105051, The Secretary of Labor should assess the likelihood and impact of inherent fraud risks facing
October 27, 2021 the UI program.
13 GAO-22-105051, The Secretary of Labor should determine fraud risk tolerance for the UI program.
October 27, 2021
14 GAO-22-105051, The Secretary of Labor should document the fraud risk profile for the UI program.
October 27, 2021
15 GAO-21-387, The Secretary of Labor should ensure the Office of Unemployment Insurance collects data from
March 31, 2021 states on the amount of overpayments waived in the PUA program, similar to the regular UI
program.*
16 GAO-21-265, The Secretary of Labor should ensure the Office of Unemployment Insurance collects data from
January 28, 2021 states on the amount of overpayments recovered in the PUA program, similar to the regular UI
program.*
Report No.,
No. Date Recommendation to DOL
17 GAO-18-633, The Secretary of Labor should update agency guidelines to ensure that it clearly informs states
September 4, 2018 about the range of allowable profiling approaches.
18 GAO-18-486, The Assistant Secretary of DOL’s Employment and Training Administration should monitor
August 22, 2018 states’ efforts to discontinue the use of formal warning policies.
19 GAO-18-486, The Assistant Secretary of DOL’s Employment and Training Administration should monitor
August 22, 2018 states’ compliance with the clarified work search verification requirements.
Appendix II: State Reports on
Unemployment Insurance
(UI) Fraud and Potential
Fraud
To address our first objective, we contacted state workforce agencies
(SWA), state auditors, and state Attorneys General offices. We asked
these entities to identify reports and other reporting mechanisms in place
from state entities related to measuring or estimating the extent of fraud
and potential fraud in UI programs during the pandemic. The scope of our
review was from March 2020—the beginning of the pandemic—through
March 2022. These are the two most recent years available at the time of
our selection. Throughout this report, we refer to measures as counts of
detected activities, and to estimates as projections or inferences based
on measures, assumptions, or analytical techniques.1
Arizona
1Estimates are often used when direct measures are unavailable, incomplete, or
unreliable.
California
10. Auditor of Public Accounts. Report of the Statewide Single Audit of the
Commonwealth of Kentucky Volume I For The Year Ended June 30,
2021. Frankfort, KY: 2022.
Louisiana
21. Ohio Auditor of State. Ohio Department of Job and Family Services:
Auditor’s Report on Unemployment Insurance Fraud for the Period
March 1, 2020 through February 28, 2021. Columbus, OH: 2021.
22. Ohio Auditor of State. Ohio Department of Job and Family Services:
Performance Audit Unemployment Compensation, September 23,
2021. Columbus, OH: 2021.
Oklahoma
Appendix III: Objectives,
Scope, and Methodology
This report addresses (1) what existing federal and state measures and
estimates indicate about the extent of fraud and potential fraud in
Unemployment Insurance (UI) programs during the pandemic and (2) the
extent to which the Department of Labor (DOL) designed and
implemented a strategy to manage UI fraud risks.
Review of Federal and State Measures and Estimates
To address our first objective, we contacted DOL, the DOL Office of
Inspector General (OIG), the Department of Justice (DOJ), the
Department of Homeland Security (DHS), state workforce agencies
(SWA), state auditors, and state Attorneys General offices. We asked
officials from these entities to identify reports and other reporting
mechanisms in place from federal and state entities related to measuring
and estimating the extent of fraud and potential fraud in UI programs
during the pandemic.1 We also independently identified state reports
related to measuring or estimating the extent of UI fraud during this time.
The scope of our review was from March 2020—the beginning of the
pandemic—through March 2022. These are the two most recent years
available at the time of our selection.2
1UI programs during the pandemic include the temporary UI programs created by the
CARES Act and the Consolidated Appropriations Act, 2021 as pandemic UI programs,
along with the regular UI and Extended Benefits programs.
2Appendix II provides a bibliography of the reports we received from SWAs, state auditors,
and state Attorneys General that discussed fraud or potential fraud in UI programs.
3Estimates are often used when direct measures are unavailable, incomplete, or
unreliable.
We reviewed the federal and state reports and identified those that
contained a measure or estimate that indicates the extent of UI fraud. Of
those, we identified reports with sufficient information for us to determine
the methodology used to arrive at the measure or estimate. For these
remaining reports, we summarized the methodologies used, along with
strengths and limitations of each as they relate to determining the extent
of fraud. We selected examples from these federal and state reports to
present in this report to illustrate the variety of fraud and fraud-related
measures and estimates.
4Public Access to Court Electronic Records is a service of the federal judiciary that
enables the public to search online for case information from U.S. district, bankruptcy, and
appellate courts. Federal court records available through this system include case
information (such as names of parties, proceedings, and documents filed) as well as
information on case status.
We also used the analysis of fraud estimates for the regular UI program
reported in DOL’s Benefit Accuracy Measurement Data Summary for
performance year 2021 and the underlying documentation to support an
illustrative extrapolation of a lower bound of fraud in UI programs during
the pandemic. This extrapolation is based on the reported estimated fraud
rate and insights derived from other existing measures and estimates. We
determined that existing measures and estimates did not provide
sufficient evidence to use this approach to extrapolate an upper bound of
fraud in UI programs during the pandemic.
Evaluation of DOL’s Efforts against Leading Practices
To address the second objective, we evaluated DOL’s UI fraud risk
management activities against the leading practices in GAO’s A
Framework for Managing Fraud Risks in Federal Programs (Fraud Risk
Framework)—specifically those leading practices related to developing an
antifraud strategy.5 The Fraud Risk Framework contains four
components: (1) commit; (2) assess; (3) design and implement; and (4)
evaluate and adapt. Within the four components, there are overarching
concepts and leading practices. In October 2021, we assessed the extent
to which DOL’s fraud risk management activities aligned with leading
practices under the second component of the Fraud Risk Framework—
assess.6 For this report, we selected two of the 15 leading practices from
the third component—design and implement—that are most relevant to
this objective based on a review of DOL documents and discussions with
DOL officials responsible for fraud risk management. We also reviewed
DOL policies, procedures, and guidance to identify newly established
controls designed to prevent fraud from occurring. Further, we
interviewed DOL and DOL OIG officials about fraud risk management
efforts.
Appendix IV: Comments from the
Department of Labor
Agency Comment Letter
Text of Appendix IV: Comments from the Department of Labor
December 12, 2022
Seto J. Bagdoyan
Director, Forensic Audits and Investigative Service
U.S. Government Accountability Office
441 G St. N.W.
Washington, DC 20548
Jared B. Smith
Director, Applied Research and Methods
U.S. Government Accountability Office
441 G St. N.W.
Washington, DC 20548
RE: Unemployment Insurance (UI): Data Indicate Substantial Levels of Fraud During
the Pandemic; DOL Should Implement an Antifraud Strategy (GAO-23-105523)
o The Secretary of Labor should designate a dedicated entity and document its
responsibilities for managing the process of assessing fraud risks to the
unemployment insurance program, consistent with leading practices as provided
in our Fraud Risk Framework. This entity should have, among other things,
clearly defined and documented responsibilities and authority for managing fraud
o risk assessments and for facilitating communication among stakeholders
regarding fraud-related issues.
o The Secretary of Labor should identify inherent fraud risks facing the
unemployment insurance program.The Secretary of Labor should assess the
likelihood and impact of inherent fraud risks facing the unemployment insurance
program.
o The Secretary of Labor should determine fraud risk tolerance for the
unemployment insurance program.
o The Secretary of Labor should examine the suitability of existing fraud controls in
the unemployment insurance program and prioritize residual fraud risks.
o The Secretary of Labor should document the fraud risk profile for the
unemployment insurance program.
During Calendar Year 2022, the Department participated in interviews with the GAO
teams responsible for the development of this Report. As stated in these interviews,
the Department determined the recommendations above would complement its
ongoing efforts to UI combat fraud and that the Department was proceeding with
implementing the recommendations. It was noted that the Department is in the
process of designating a dedicated entity and documenting responsibilities for
managing the process of assessing fraud risks. Also, the Department is working to
develop a UI fraud risk profile in accordance with the GAO Fraud Risk Framework.
Given the intricacies and complexities associated with the UI program, the
Department needs to invest the appropriate time and resources to ensure that this UI
fraud risk profile will support a comprehensive strategic approach. Further, we are
working to ensure that the development process is done correctly to encourage and
promote the potential use of GAO’s Fraud Risk Framework elsewhere in the
Department.
The Department acknowledges that there is not yet an antifraud strategic plan based
on the GAO Framework and resulting UI fraud risk profile. However, the Department
has an UI Integrity Strategic Plan for the UI program. Many of the strategies directly
address identified fraud risks in the UI program. For example:
· Regarding the fraud risk associated with claims filed in the name of deceased
individuals, the Department has invested in tools for states to use as part of the
UI Integrity Center’s Integrity Data Hub (IDH), which is funded by the
The Secretary of Labor should design and implement an antifraud strategy for UI
based on a fraud risk profile consistent with leading practices as provided in the
Fraud Risk Framework.
“While DOL is in the process of developing its fraud risk management program, our
six recommendations from October 2021 related to fraud risk management and
assessing fraud risks remain open. DOL must first implement these
recommendations to be positioned to create and execute an antifraud strategy,
consistent with leading practices, that targets fraud risks in a prioritized manner.
Without these efforts, DOL cannot ensure that it is prioritizing UI fraud risks
effectively.”
Sincerely,
BRENT PARTON
Acting Assistant Secretary
1 https://www.gao.gov/products/gao-22-105051
Appendix V: GAO Contacts
and Staff Acknowledgments
GAO Contacts
Seto J. Bagdoyan, (202) 512-6722, BagdoyanS@gao.gov
Staff Acknowledgments
In addition to the contacts named above, Gabrielle Fagan (Assistant
Director), Lauren Kirkpatrick (Analyst in Charge), Benjamin Bolitzer, Colin
Fallon, Lisa Fisher, Hunter McCormick, Maria McMullen, Steven Putansu,
and Sabrina Streagle made key contributions to this report. Other
contributors include Amber Gray and Nick Weeks.
(105523)
Page 66 GAO-23-105523 UI Fraud
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